SMM March 19 News: On March 19, under the backdrop of a strong supply and weak demand for silicon metal, the futures price of the most-traded contract fell below the key threshold of 10,000 yuan/mt on March 11 and continued to decline intraday, hitting a low of 9,740 yuan/mt, the lowest since October 17, 2024. By the close of the daytime session, the most-traded silicon metal contract dropped 1.66% to settle at 9,785 yuan/mt. In the spot market, according to SMM spot quotations as of March 19, above-standard #553 silicon (east China) spot prices remained stable at 10,300-10,500 yuan/mt, with an average price of 10,400 yuan/mt, marking a three-year low. Click here to view SMM silicon product spot prices. The sluggish performance of silicon metal futures prices is closely tied to its weak fundamentals. Specifically: Supply Side: Supply Is Expected to Increase in March According to SMM data, silicon metal production in February 2025 was approximately 289,500 mt, down 14,500 mt or 4.8% MoM. However, on a daily average basis, February's production exceeded January's. By province, silicon companies in Xinjiang, Inner Mongolia, and Gansu operated at relatively high rates, with these three regions accounting for over 80% of total supply, while Sichuan and Yunnan contributed less than 6%. With the release of production from newly restarted silicon furnaces, coupled with additional restarts expected in March and an increase in production days, SMM estimates that silicon metal production in March will significantly increase compared to February, potentially exceeding 340,000 mt. Demand Side: Current Demand Remains Mediocre By sector, in polysilicon, SMM expects polysilicon companies' operating rates to remain relatively stable from February to March. February's polysilicon production reached approximately 90,100 mt, and March's production is expected to increase to around 94,600 mt. Although overall operating rates in March are expected to remain stable, SMM anticipates that monthly polysilicon production may rise to 110,000 mt in April-May, which could drive up demand for silicon metal. In silicone, according to an SMM survey, the operating rate of the silicone industry in February declined significantly compared to January. February's silicone DMC production was 199,500 mt, down 9.6% MoM, and March's operating rate is expected to weaken further. Some silicone monomer capacities underwent maintenance, leading to reduced production and decreased demand for silicon metal. According to SMM's latest survey on March 18, amid continued declines in silicone prices, silicone monomer companies have implemented unprecedented production cuts, with the industry preliminarily determining that this round of cuts will affect 40% of capacity. SMM expects that after this round of coordinated production cuts, the operating rate of silicone monomer companies will drop from 70% to around 60%. The actual implementation of these adjustments will require further monitoring. In aluminum-silicon alloys, performance remained relatively stable, with operating rates gradually returning to normal levels in February-March, maintaining purchasing as needed for silicon metal. Inventory: According to SMM data, silicon metal inventory saw a slight destocking in March, primarily due to the continuous decline in the most-traded futures contract price at the beginning of the month, which improved the price advantage and boosted sales. However, inventory levels remain near historical highs. Considering the stable operating rates in downstream demand and purchasing as needed, combined with high supply levels, there is currently no basis for a significant and sustained destocking. Click here to view the SMM database. Overall, silicon metal supply remains strong, while demand-side operating rates are mostly stable, resulting in little change in demand for silicon metal and purchasing remaining on an as-needed basis. The continued decline in silicon metal prices has left many producers operating at a loss. Spot market supply is abundant, and price competition is intense. Additionally, the recent slight weakening of silicon coal prices has reduced cost support for silicon metal. Under these combined factors, the downward trend in silicon metal prices persists. Looking ahead, SMM expects that after slight destocking in January-February, the supply-demand balance for silicon metal may shift back to surplus in March as operating capacity increases and production rises, while demand shows little growth. Polysilicon companies with integrated silicon metal capacities have relatively large scales, with large-scale silicon companies (annual capacity of 100,000 mt or more) accounting for a higher share of supply and offering greater stability compared to small and medium-sized companies. The fundamental outlook for silicon metal is expected to remain strong supply and weak demand in the near term. Even if some small and medium-sized companies cut production, it is unlikely to change the supply-demand dynamics significantly. Therefore, SMM expects spot silicon metal prices to remain at the bottom in the short term. Future attention should focus on the commissioning of new capacities, the possibility of large-scale production cuts in the industry amid prolonged weakness, and whether coordinated production cuts among silicone monomer companies can improve profitability and drive increased demand for silicon metal. Institutional Comments Nanhua Futures stated that spot market prices for silicon metal are running weak and stable, with market sentiment remaining sluggish. Producers are reluctant to sell at low prices, and overall supply changes little. Some small and medium-sized producers are considering production cuts or halts, but the short-term impact on actual production is minimal. The market is dominated by low-priced spot and futures cargoes, with strong downstream bargaining pressure, slow transaction pace, and persistent destocking pressure. Silicon coal prices have slightly weakened, leading to a slight reduction in cost support for silicon metal. Everbright Futures noted that the most-traded silicon metal contract has fallen below the 10,000 yuan threshold, but large plants in Xinjiang have yet to initiate production cuts. Downstream polysilicon capacity expansion has been delayed, and silicone production cuts continue. Under the pressure of high inventory, silicon metal continues to explore lower levels. Caution is advised regarding potential news of production cuts by large plants, which could trigger a significant rebound. Polysilicon remains a strong support at high levels, while phased destocking dilutes demand, limiting upward potential. Continued attention should be paid to the production schedule of silicon wafers and policy developments. Guangzhou Futures commented that from a fundamental perspective, the sluggish market has led to production cuts among small northern plants, while southwestern plants maintain low operating rates with no further room for cuts. Meanwhile, large northern plants are expected to restart production, and integrated capacity projects are gradually coming online, making it difficult for supply to decline significantly. With no significant improvement in demand, resistance to a rebound in futures prices is expected to persist. SDIC Futures stated that the prices of key raw materials, such as silicon coal in Xinjiang and Ningxia, have fallen again, leading to a continued decline in silicon metal production costs. Silicon metal inventory remains at high levels, while downstream demand shows no significant signs of recovery. Xinjiang silicon metal producers continue to increase operating rates. After futures prices hit the cash cost plus regional discount levels in low-cost production areas, the market has entered a short-term low-level consolidation phase.
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Mar 19, 2025 18:23
